Few know that in the summer of 1998 Netflix the future was jeopardized at a meeting that brought the founders, Reed Hastings and Marc Randolph, face to face with Jeff Bezos, the CEO of Amazon, the e-commerce giant.
A ‘no’ to a millionaire company suggested by Bezos was, perhaps, what saved Netflix from disappearing from the map and what ultimately led it to become the successful entertainment and subscription service company
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The ins and outs of that Netflix vs. Amazon, which took place more than 20 years ago, is described in detail in the book “That will never work: the birth of Netflix and the great life of an idea “, written and published by Marc Randolph in 2019. The story has also been told in media such as CNBC Make It.
An unexpected phone call
Netflix has been operating as a DVD movie rental company competing with Blockbuster for about a year and a few months.
Hastings and Randolph were running a website and a string of deals with DVD manufacturers to keep the business going when they received a call in the summer of 1998.
“Jeff (Bezos) wanted to meet us,” Randolph told CNBC in an interview.
Although at the time Amazon was far from the most valuable brand in the world and all Jeff Bezos to become the richest man in the worldIt was not just any company. Randolph says in his book that after four years of operation, Amazon already had $ 100 million in annual revenue from book sales and about 600 employees.
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These numbers motivated Randolph and Hastings to fly to Seattle to meet Bezos. However, they anticipated what the emerging e-commerce player was up to.
“They wanted to be an ‘everything store’. That would never work, ”Randolph wrote in his book. At the time, Amazon was looking for different types of businesses to expand, and the video market was certainly an attractive option.
When the co-founders of Netflix arrived at the Amazon offices, they were in for a surprise. ‘We entered an office that was a pigsty. The people were crowded there. The desks were old wooden doors and Jeff (Bezos) was in an office with four other people, ”says Randolph.
There they were offered to buy Netflix for an “eight-figure amount.” “That could mean anything between $ 14 million and $ 16 million.”Randolph wrote in his book.
It was an attractive proposition for a company that has only been around for a few months and for the two entrepreneurs. At the time, Randolph owned 30% of the company and Hastings 70%.
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The book reveals what they both thought of the offering. At the time, Hastings would have thought that Netflix had much greater potential than Bezos’ offering.
Randolph, on the other hand, felt good about that money. After all, the profitability of the rental model was not great and the operating costs were high.
On the return flight, both partners weighed up the pros and cons and ultimately decided that this was not the time to step aside. Upon landing, they called Amazon and rejected Bezos’ proposal.
While no purchase has taken place, the Business Insider portal does ensure that Randolph’s memoirs capture a brief association between Netflix and Amazon. Netflix contained links that allow customers to purchase DVDs from Amazon, and Amazon, in turn, referred to a link to rent movies on Netflix. But while, Randolph says in his book, the company was successful for Amazon, it wasn’t as successful for Netflix. The alliance ended and each of the companies went their separate ways.
That ‘no’ to Jeff Bezos’ proposal and the distance both companies took was a defining part of Netflix’s history. Today, that $ 14 million or $ 16 million purchase offer from Amazon compares nothing to the position that the leader of subscription audiovisual content holds today.
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According to the most recent reports, Netflix ended 2020 with a profit of $ 2,761 million. And according to Forbes statistics, Netflix’s sales are on the order of $ 21.4 billion and they have 8,600 employees to date.
In recognized Forbes lists, Netflix is ranked 26th in the ranking of the world’s most valuable brands in 2020.
It was also confirmed just over a week ago that Netflix had surpassed 200 million subscribers by the end of 2020.
TIME